Mortgages Uncovered

Those who jumped on the buy-to-let bandwagon a little late face the very real possibility of financial ruin.  Many saw the potential earnings and figured buy-to-let seemed an easy way to pave their way to retirement.  Some even remortgaged their own home in order to buy a second house to let.

Unless the landlord is equity-rich, which for many means having bought their buy-to-let house(s) almost a decade ago, there are several factors which are all happening at once and mean many tens of thousands of landlords could find themselves in a sticky situation with negative equity, rent not covering the mortgage or even repossession.

‘Armchair landlords’ as they are called generally have hefty mortgages based on houses with over-inflated values, which are now falling fast.  They generally got their mortgages quite easily but on the condition of high rents, which didn’t materialise.  With the buy-to-let boom came many inner city apartment blocks, built and promoted as ‘ideal for buy-to-let’ but supply soon exceeded demand and many have found them difficult to let.

If the landlord is in negative equity and the rent is barely covering the mortgage, some armchair landlords will be holding on for dear life, funding the excess mortgage payment out of their own pocket.  As long as they can hold on like that, they may be lucky, however, many are on fixed two- or three-year deals and as these come to an end the increased cost of lending will mean even higher mortgage payments – if they can get the mortgage at all.

It’s looking very gloomy and unless something changes drastically in the next twelve months, there are going to be a lot of repossessions coming up.